Since Jive itself went public barely five short months ago, the company faces a looming overhang that could soon pound its richly valued shares. When Jive carried out its IPO late last year, past news coverage reveals, the company originally released less than one-quarter of its shares onto the public market and subjected the vast majority of its stock to trading restrictions that will expire very soon.

“JIVE is one of the few IPOs holding up,” one investor noted last month, shortly after cutting his own stake in the company. “Gotta feeling its days are numbered.”

Indeed, records show, Jive promptly tanked the very next week and has staged only a modest comeback since that time. Now a popular target of hungry bears, records indicate, Jive has attracted a growing crowd of short sellers – clearly aware that the lockup period will soon end – who keep raising their bets against the stock in anticipation of an oncoming crash.

Jive did not respond to questions for this story

Short Honeymoon

Based on recent history, that threat looks very real and the fear behind it justified as well. Like Jive itself right now, recordsindicate, LinkedIn once counted Sequoia Capital among the largest holders of its restricted shares when it began trading on the public stock exchange. Following in the footsteps of other early LinkedIn backers who rushed to lock in their paper gains, however, Sequoia has since gone on to sellits gigantic stake in that social media company.

Together with a second venture capital firm, The Wall Street Journal noted last summer, Sequoia paid barely $5 a share for a portion of its Jive stock in mid-2010 and previously spent even less -- just $3.68 a share -- for the stock that it secured as the first major backer of the bleeding software firm. All told, past newsrecords indicate, Sequoia and its financing partner Kleiner Perkins Caufield & Byers (KPCB) provided about $100 million in funding to Jive before the company went public and wound up with a mountain of restricted stock – worth more than $550 million at current market prices – in return.

That lucky duo controls 23.6 million shares of restricted stock in the company, recordsindicate, a total that practically matches the 23.7 million shares that have reached the public market at this point. Therefore, those two firms could effectivelydoublethe existing float – all by themselves – if they dump their valuable shares once the lockup period officially expires.

On June 1, the threat that first hammered Groupon five months earlier will finally materialize. With restricted stockholders free to sell their shares, Forbes has cautioned, “expect them to rush for the door at the first possible moment.” Since Groupon initially released only a tiny fraction of its shares when it went public, expertshavewarned, the company could see its stock come under heavy selling pressure once again.

“There is a standard 180-day lockup, which would date the release on or around June 9, 2012,” UBS dutifully reported back in January, with that threat (listed at the end of the obligatory “Risk Analysis” section) still a safe distance away. Then “48 million shares are expected to become available for sale, representing roughly 64% of diluted shares outstanding.”

While 10 million of those shares have apparently snuck into the public float already, current figures suggest, Jive has yet to release at least 37.7 million of its 61.5 million outstanding shares onto the market at this point. Sequoia and KPCB still own their gigantic stakes in the company, recordsindicate, but corporate executives apparently rushed to cash in some of their cheap shares.

The very week that Jive first began trading, recordsshow, five officers sold almost $20 million worth of stock in their newly public company. They parted with only a small portion of their vast holdings, however, so they still have plenty of stock left to sell. The two youngco-founders inherited more than 6.5 million shares apiece, records show, while other company leaders divided up a pile of cheap stock options to purchase a similar number of shares.

LeBlanc scored 1 million stock options in all, corporate filings show, the vast majority of them fully vested and exercisable at just 53 cents to 56 cents a share. Going forward, those filings indicate, LeBlanc could pocket a handsome eight-figure payout of his own – if Jive actually holds on to its enormous gains -- by cashing in those vested options (with plenty of unvested options left over) once the lockup period comes to an end.

But Fogdog, the last Internet company that LeBlanc brought to the market, produced only fleeting gains instead. When Fogdog went public in late 1999, past news coverage shows, the stock briefly doubled to more than $20 a share on its opening day of trade. With Fogdog spiraling all the way to $1 just nine months later, however, Forbes bluntly proclaimed that the company had relied on “accounting hooey” to achieve a double-digit stock price in the first place. Shortly after that, records show, Fogdog rushed into the arms of a stronger rival – selling itself for a tiny fraction of its original market value – just as the Nasdaq prepared to delist the penny stock from its respected exchange.

“Soon after Fogdog went public last year, its market value skyrocketed past $750 million,” Dow Jones remindedat the time. “Eleven months later, Global Sports (GSPT) now says it will buy the company in a deal valued at $38.4 million … Talk about a haircut.”

Three years after Fogdog carried out that fire sale, its IPO made headlinesonce again. At that time, records show, securities regulators filed charges against a Fogdog underwriter for alleged violations that allowed the firm to score outsized profits on the public offering.

Before Jive tapped him as its leader, recordsshow, Zingale ran another technology company tainted by outright scandal.

Zingale previously served as the turnaround CEO at Mercury Interactive, The Wall Street Journal noted back in 2006 (when he still held that post), one of the first high-tech companies caught up in a sweeping investigation focused on backdated stock options. Although Zingale arrived on the scene years after that suspicious activity took place, the Journal observed, he inherited a company that would continue to operate under a dark cloud nevertheless. With Zingale at the helm, the newspaper recounted, Mercury wound up restating a decade worth of financial reports – and temporarily losing its spot on the Nasdaq exchange – in a rocky comeback that finally allowed the company to sell itself to Hewlett-Packard (NYSE: HPQ) in a multibillion-dollar deal.

Jive lured Zingale to the company a few years after he negotiated that transaction, recordsshow, and now counts Hewlett-Packard as one of the most treasured names on its entire client list. Earlier this year, however, a muscular rivalapparently scored a major contract with that big electronics company as well.

“Salesforce (NYSE: CRM) has landed Hewlett-Packard … as probably its biggest customer and has been talking about it since it last reported earnings,” Dow Jones noted about two months ago. “Look for Salesforce to play up this relationship as often as it can in the coming year.”

Jive still provides the social-networking platform utilized by Hewlett-Packard, Dow Jones acknowledged, which said that it has “no existing plan” to shift from its current system to the rival program offered by Salesforce (hired for other services) instead. Although Jive ranks Hewlett-Packard among its most valuable customers, based upon the size of its contract, the company likes to brag that “millions of people at the world’s largest companies” by now use its platform to “transform their businesses.” With that customer base increasing at a much slower rate than its overall sales, however, Jive readily acknowledges (and, in fact, repeatedly cautions) that the company depends heavily on the continued renewal – and lucrative expansion – of existing accounts to drive its surging revenue.

At the same time, however, Jive weathered major deterioration in a related metric that serves as a critical guide to future sales. Jive keeps a running tally of the invoices that it submits upon landing its contracts, records show, with the company presenting that supplemental billings figure as a "significant performance measure and a leading indicator of future recognized revenue" that will determine the level of its top-line growth.

While bookings practically doubled back in 2010, with Jive setting a new record by posting a $35.7 million surge in bookings for the year, that growth rate fell by more than half in 2011 despite the massive sums the company spent while pursuing that business. Jive invested an extra $15 million in sales and marketing for starters, with its sales force expanding by more than 20% in the second half of the year alone, and threw an additional $12 million or so into the research and development of enhanced technology that could help drum up more customers as well. Corporate overhead literally exploded along the way, accelerating even faster than its other major costs, with those bills costing almost twice as much as they had the previous year. By the time that 2011 came to an end, records show, Jive had seen its operating costs skyrocket by a whopping 65% to almost $90 million -- a massive sum for a company that had generated barely half that amount in total sales the prior year -- and wound up with little to show for all of the extra money that it had spent.

After beefing up its sales team and indulging in a far more generous marketing budget last year, corporate filings show, Jive posted a $33.1 million rise in bookings that actually fell 7% shy of the record gain that the company had achieved in 2010 with far more limited resources. Despite the expanded reach of its sales force and the enhanced funding for advances in the technology that it offers, those filings show, Jive witnessed a sizable drop-off in its customer gains last year as well. The company added just 77 customers to its client list in 2011, records show, or 37% fewer than the 122 that it netted one year earlier.

As an unprofitable company with no forecasted earnings in sight, Jive remains valued almost exclusively on its top-line performance. Even based on this forgiving metric, which ignores ongoing losses, Jive looks incredibly overvalued at current prices. Jive already trades at almost 10 timesits forecasted 2013 sales, while other software technology companies trade at an average of barely three times the sales they have already achieved. That group, as a whole, boasts healthy double-digit sales growth of more than 20% a year and -- unlike Jive itself -- typically makes money in the process.

Click here for the first article in this two-part report on Jive Software.

* Important Disclosure: Prior to the publication of this investigative report, TheStreetSweeper (through its members) established a short position in JIVE with the intention of profiting on any future declines in the stock price. Currently, TheStreetSweeper has sold a total of 93,529 shares of JIVE short at an average price of $23.91 a share. It covered 15,539 shares on May 3 at $23 a share, 21,461 shares at $22.77 a share on May 4 and 27,600 shares at $22.63 a share on May 7. It covered the remaining 28,929 shares on May 8 at $21.84 a share and no longer has a position in the stock. Going forward, TheStreetSweeper may choose to establish a new short position in JIVE and will fully disclose the details of any future transactions in the stock as those trades occur.

As a matter of policy, TheStreetSweeper prohibits members of its editorial team from taking financial positions in the companies they cover. To contact Melissa Davis, the primary author of this report, please send an email to editor@thestreetsweeper.org.